GOVERNMENT INTERVENTION AND STATE TRADING

Publication Date01 May 1981
AuthorK. P. E. Lasok
DOIhttp://doi.org/10.1111/j.1468-2230.1981.tb01628.x
THE
MODERN
LAW
REVIEW
-
Volume
44
May
1981
No.
3
GOVERNMENT INTERVENTION AND
STATE TRADING
INTRODUCTION
IN
1978
the House of Lords gave judgment in
a
case coming before
the House as an award in the form of
a
special case stated by a
panel of arbitrators
of
the Council
of
the Refined Sugar Association.
The decision in
C. Czarnikow
Ltd.
v.
Centrala Handlu Zagranicz-
nego
Rolimpex
(hereafter referred
to
as
Czarnikow
v.
Rolim-
pex,
the parties being similarly denominated) terminated a
protracted dispute which was one of a number arising from the
failure of the Polish sugar crop in
1974
and the consequent pro-
hibition on sugar exports imposed by the Polish Government. The
principal issue in the case related to the relationship between
Rolimpex,
a
Polish state trading organisation, and the Polish
Government.
As
a
result of the Arbitration Act
1979,
which implements the
recommendations of the Commercial Court Committee’s Report
on Arbitration,2 the days
of
such cases reaching an English court
from arbitration now appear to be numbered. Furthermore, con-
temporaneous developments in English case law,3 coupled with the
State Immunity Act
1978
and the European Convention on State
Immunity
1972,
seem to have finally settled the question whether
state owned or controlled entities may rely on sovereign immunity
to avoid their contractual obligations. Does this decision, therefore,
merit anything more than a short case note indicating its existence?
It is submitted that it does.
The two matters that were in essence decided by the House in
Czarnikow
v.
Rolimpex
related to the ability of a state trading en-
terprise
to
rely
on
Government intervention to avoid
a
contract
pursuant to
a
force majeure
clause and to the effect of
force
majeure
on
the obligation to provide necessary export licences.
This latter aspect of the case gave rise to an interesting, if recondite,
discussion concerning the interpretation
of
the relevant contractual
terms and
so
lacks, perhaps, the wider significance that would merit
[I9791
A.C.
351.
2
Cmnd.
7284.
3
Ct. The Philippine Admiral
[I9771
A.C.
373:
Trendfex Tradina Corooration
v.
Central Bank
of
Nigeria
[I9771
Q.B.
529;
I
Congress0 del Parlido
119781
Q.B.
500.
VOL.
44
(3)
249
1
250
THE
MODERN LAW REVIEW
[Vol.
44
detailed consideration of
it.
The more fundamental issue was that
relating to Rolimpex’s reliance on the Polish Government’s pro-
hibition of exports as
force inajeure
and it is this aspect of the case
that is proposed as the subject of the following discussion.
Hitherto, most commentators have preoccupied themselves with
the very interesting question of the plea of sovereign immunity by
state trading enterprises. In practice this weapon was used rarely
and for the very reasons pointed out by Scrutton
L.J.
in
The
Porto
Ale~andre.~
Section
3
of the State Immunity Act
1978
would now
prevent reliance on sovereign immunity in proceedings relating to
commercial transactions as defined in section
3
(3)
of the Act; but
section
14
allows sovereign immunity to be pleaded by an entity
distinct from the executive organs of the Government of
a
state if
the proceedings relate to something done in the exercise of sovereign
authority and in circumstances in which
a
state would be immune.
Czarnikow
v.
Rolirnpex
is one of the very few cases, and possibly
the only House of Lords decision, in which
a
state trading enter-
prise has avoided its contractual obligations without the necessity
of pleading sovereign immunity. For this reason
it
has
a
certain
intrinsic interest.
Despite the limitations imposed by the Arbitration Act
1979
on
the review
of
arbitral decisions by English courts, situations similar
to that
of
Czarnikow
v.
Rolimpex
are likely to continue to be the
subject
of
arbitration proceedings
in
this country in which the deci-
sion of the House
of
Lords may be cited as
a
high, indeed the high-
est, authority. It is possible that the changes wrought by the
Arbitration Act may result in more such cases being decided by
arbitrators in England because, it may be recalled, at common law
parties cannot by contract oust the jurisdiction of the
court^.^
Section
21
of the Arbitration Act
1950,
in consequence, set out the
special case procedure whereby an arbitrator or umpire might, and
was obliged to if
so
directed by the High Court, state any question
of law or any award or part of it in the form
of
a special case for
decision by the High Court. It was generally thought that where a
point of law arose the arbitrator had to adopt the special case pro-
cedure.6 As a result, special cases were used in many, often trivial,
cases. The special case procedure was ~riticised,~ particularly where
foreign parties were involved, because the very wide right to state
a
case only prolonged the period taken to reach a final decision,
increased costs and subjected foreign parties to the jurisdiction of a
foreign court.
Section
1
of
the Arbitration Act
1979
replaces the special case
procedure with a limited right
of
appeal to the High Court which
can only be exercised with the consent of all the parties
to
the refer-
4
[19201
P.
at pp. 38-39.
5
Scotr
V.
Avery
(1856)
5
H.L.C. 811.
6
Cf. Halfdan, Grieg
&
Co.
AS
v.
Sferling
Coal
&
Navigation
Corp.
[1973]
1
7
See the Commercial Court Committee’s Report.
Q.B.
843.

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